U.S. Micro-Merchant Activation Levels

Navigator Edition: May 2012
By: Marc Abbey and Chris Sanson

It is virtually impossible not to have noticed the success of Intuit, Square, and PayPal in attracting a large number of micro-merchants to their mobile POS offerings.  It is also clear that mainstream acquirers are responding.  A key question is how these micro merchant portfolios will perform.  The volume and activation characteristics of these merchants will become clear over time, but in the meantime, we can look to the characteristics of traditional merchants in similar size ranges to draw some inferences.

Figure 1: Total Months Merchants with  $500 – $5,000
in Visa/MasterCard Volume Process in a Year


Source: First Annapolis Consulting analysis.

It is a myth that traditional acquirers do not sign micro-merchants.  We examined the portfolios of 21 U.S. acquirers, and over 60% of their merchants had less than $125,000 in Visa and MasterCard volume per year.  Over 20% of their active merchants had annual volume less than $10,000.

On average, active merchants that have volume less than $50,000 are active in over 11 months in a year – a relationship that is likely not surprising to most acquirers.  However, we also isolated merchants that had <$5,000 in annual volume and were active in the year before and year after our study year.  Even merchants this small had volume in 7.9 months a year on average.  As illustrated in the accompanying graphic, nearly one quarter of such micro merchants had volume in each month of the year.  It seems quite likely that players like Square are not attracting merchants with these activation and transaction levels, suggesting that there are different segments within micro-merchants of similar size and incidentally, suggesting there are limits to the comparability between merchants of similar size that traditional acquirers and the mobile POS players are signing.

For more information, please contact Marc Abbey, Partner specializing in Merchant Acquiring,; or Chris Sanson, Senior Analyst specializing in Merchant Acquiring,

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